Arizona Real Estate License Practice Exam 2025 - Free Real Estate Practice Questions and Study Guide

The scenario in which a buyer cannot demand the return of earnest money occurs when a contract is binding. In real estate transactions, the earnest money is typically given as a sign of good faith to demonstrate the buyer's commitment to purchasing the property. Once a legally binding contract has been formed, both parties are required to adhere to the terms of that contract.

If the buyer were to try to back out after a binding contract is established, they would likely forfeit the earnest money as stipulated in the agreement. This forfeiture is a form of penalty for not fulfilling the contractual obligations. On the other hand, if the offer has been rejected, there is no contract formed, and thus the earnest money can be returned. Similarly, if the seller has a stipulated timeframe to respond, the buyer can still potentially withdraw the offer and seek the return of their earnest money. Waiting does not change the binding nature of a contract once it's signed.

Therefore, once a binding contract exists, the buyer’s ability to reclaim earnest money becomes limited, as the contract dictates the terms of the transaction.